Basel Committee publishes a range of practices report on implementing a positive neutral countercyclical capital buffer
Basel Committee has published a range of practices report on
implementing a positive neutral countercyclical capital buffer (CCyB).
An increasing number of jurisdictions have voluntarily chosen to
introduce a positive neutral CCyB when risks are judged to be neither
subdued nor elevated. The report considers the different
jurisdictional frameworks for implementing a positive neutral CCyB.
The Basel Committee on Banking Supervision today issued
a range of practices report on implementing a positive neutral CCyB.
In 2010, the Committee published guidance that detailed the key
requirements for operating the CCyB, and in 2017 it published a paper
discussing the range of practices in implementing the CCyB, which
examined how jurisdictions have used the flexibility in the CCyB
framework when designing their CCyB policies. Since then, an
increasing number of jurisdictions have chosen to use this flexibility
to voluntarily introduce a positive neutral CCyB, ie a non-zero CCyB,
when risks are judged to be neither subdued nor elevated. In 2022, the
Committee published a newsletter in which it supported and
acknowledged the benefits of authorities' ability to set a positive
neutral rate for the CCyB.
This report builds on those prior
Committee publications by examining the observed range of practices
adopted by jurisdictions which have chosen to implement a positive
neutral CCyB. It considers the different jurisdictional frameworks for
implementing a positive neutral CCyB, describes the various observed
approaches to the calibration and operation of the buffer, and
discusses reciprocity considerations.
Authorities that have
introduced a positive neutral CCyB have found it helpful for banks in
their jurisdictions to have buffers of capital in place that can be
released in the event of sudden shocks, including those unrelated to
the credit cycle, such as the Covid-19 pandemic.
The adoption
of a positive neutral CCyB approach is not required by Committee
members, and the report does not seek to discuss or opine on the
merits or demerits of a positive neutral CCyB relative to other
macroprudential measures or tools. Some jurisdictions may use tools
other than the positive neutral CCyB to address similar risks, based
on their specific jurisdictional circumstances.
Note to
editors
The Basel Committee is the primary global standard
setter for the prudential regulation of banks and provides a forum for
cooperation on banking supervisory matters. Its mandate is to
strengthen the regulation, supervision and practices of banks
worldwide with the purpose of enhancing financial stability. The
Committee reports to the Group of Central Bank Governors and Heads of
Supervision and seeks its endorsement for major decisions. The
Committee has no formal supranational authority, and its decisions
have no legal force. Rather, the Committee relies on its members'
commitments to achieve its mandate. The Group of Central Bank
Governors and Heads of Supervision is chaired by Tiff Macklem,
Governor of the Bank of Canada. The Basel Committee is chaired by Erik
Thedéen, Governor of Sveriges Riksbank.
More information
about the Basel Committee is available here.